Bitcoin is at a two-week low. Why is Bernstein expecting a bull market until 2027?

The bitcoin rate fell below $113,000 for the first time in two weeks, and other cryptocurrencies fell in price in parallel with it. Investors are wary of tough signals from Fed Chairman Jerome Powell on Friday, Coindesk explains. Bank of America suggested, contrary to traders' expectations, that the Fed will not cut the rate in September. At the same time, Bernstein gave a "bullish" forecast for cryptocurrencies and related assets for the next two years.

- In trading on Tuesday, bitcoin was down 3% to $112.9 thousand, while the second most capitalized cryptocurrency Ethereum was down 5% to $4.2 thousand. Quotes of other cryptocurrencies (altcoins) also fell: Solana, Chainlink, Avalanche, Toncoin, Ethena and Aptos fell in price by 4-6% during the day.

- The fall in cryptocurrencies coincided with a reversal in traditional markets towards "risk-aversion": The S&P 500 and Nasdaq Composite were down 0.6% and 1.5%, respectively, Coindesk notes.

- Share prices of companies investing in cryptocurrencies fell: KindlyMD, focused on bitcoin, fell by 11.7%; Bitmine Immersion and Sharplink Gaming, investing in Ethereum, lost 9.3% and 8.7%, respectively. Even the segment's largest representative, Michael Saylor's Strategy, sagged 7.4% on Tuesday.

- On August 19, the securities of crypto exchanges Coinbase and eToro fell in price by 5.8% and 6.1%, respectively, and the trading platform Robinhood - by 6.5%.

- Shares of bitcoin miners Mara Holdings and Riot Platforms fell 5.7% and 3%, respectively.

- Quotes of the steiblcoin issuer USDC Circle fell by 4.5%.

Investors have reduced their appetite for risky assets due to concerns about the hawkish rhetoric of the Fed. Market participants, recently confident in the Fed's rate cut in September, now do not rule out that the head of the regulator Jerome Powell will advocate its preservation. His speech on Friday will open the annual economic symposium in Jackson Hole. While there have been signals of a weakening labor market and slowing economy in recent weeks, last week's unexpectedly "hot" producer price report (PPI) has reignited inflation fears, Coindesk writes.

Bank of America economists said in a fresh survey that the Fed is unlikely to cut rates in September. "With inflation essentially stuck at one level, the effect of duties expected, and unemployment remaining historically low thanks to a tight labor supply, the Fed still has reason to keep the rate unchanged," BofA analysts said in a note cited by Coindesk.

According to the CME FedWatch Tool, the probability of a 25 basis point rate cut in September is now estimated by traders at 85% - up from 98% last week.

The cryptocurrency market tends to be vulnerable to fluctuations in tech stocks due to a growth-oriented investor base whose actions are highly dependent on the news background, CNBC explains. If Fed Chairman Jerome Powell signals possible policy easing, cryptocurrencies could bounce back upward, the channel said.

"When Powell speaks in Jackson Hole, we typically see profit taking ahead of his statements," Satraj Bambra, CEO of hybrid exchange Rails, noted in an interview with CNBC. - In any case, when there is uncertainty in Fed communications, traders tend to partially exit risk positions."

Despite the fall in cryptocurrencies and related assets on Tuesday, Bernstein shared an optimistic outlook for them in the long term. "The bull market in cryptocurrencies could last until 2027, his analysts believe, with Robinhood, Coinbase and Circle benefiting the most." Bernstein reiterated an Outperform rating on these companies, and raised its target price on Robinhood's stock from $105 to $160. This is 49% above the current value of the securities.

Analysts led by Gautam Chhugani believe bitcoin will hit $150,000-200,000 over the next year, but believe the rally will also spread to Ethereum, Solana and decentralized cryptocurrencies (DeFi), making Coinbase a key beneficiary.

Lower interest rates in late 2025 could boost demand for staking (a type of investment that helps keep the blockchain running and generates income for token holders), and onchain yield products (apps and services that run inside the blockchain), while Ethereum and Solana-based treasury asset strategies could replicate MicroStrategy's approach to bitcoin, but with added yield, analysts said.

Bernstein expects trading volumes to grow through 2026 and peak in 2027. Analysts pointed to the already noticeable increase in activity on the Robinhood and Coinbase platforms, as well as the surge in USDC supply. Coinbase's expansion into derivatives trading and Circle's improved adoption of USDC underpin Bernstein's positive assessment, Coindesk explained.

Robinhood's diversified business model is expected by analysts to deliver a compound annual growth rate (CAGR) of 53% in earnings per share through 2027, Bernstein said in a note.

This article was AI-translated and verified by a human editor